How to Calculate MAO (Maximum Allowable Offer)

What is MAO?

MAO stands for Maximum Allowable Offer. It's the ceiling on what you can pay for a property while still making your target profit. Go above MAO, and your deal becomes unprofitable. Stay at or below, and you're in good shape.

The Basic MAO Formula

MAO = (ARV × 70%) - Repairs

The classic "70% rule" formula

Let's break down each component:

ARV (After Repair Value)

What the property will sell for after repairs. You determine this by looking at comparable sales (comps) in the area, similar properties that have sold recently. Your deal analyzer can help with this.

The 70% Multiplier

Why 70%? Because you need 30% of ARV to cover costs and profit. Here's how it typically breaks down:

Profit margin: 10-15%
Closing costs (buy + sell): 3-6%
Holding costs: 2-5%
Buffer for surprises: 5%

See our full guide on the 70% rule for more detail.

Repair Costs

What it will cost to bring the property to ARV condition. Get estimates from contractors or use per-square-foot estimates based on scope (light, medium, heavy rehab).

MAO Example Calculation

Example Property:

ARV: $250,000
Repair estimate: $40,000

MAO = ($250,000 × 0.70) - $40,000

MAO = $175,000 - $40,000

MAO = $135,000

Offer $135,000 or less to meet your profit target.

MAO for Wholesalers vs Flippers

If you're a flipper, the formula above gives you your MAO, the most you can pay.

If you're a wholesaler, you need to leave room for your assignment fee. Your buyer (the flipper) will use the formula above. Your MAO is lower:

Wholesaler MAO = Flipper MAO - Assignment Fee

If the flipper's MAO is $135,000 and you want a $10,000 assignment fee, your MAO is $125,000. Learn more in our wholesaling guide.

When to Adjust the 70%

The 70% rule is a starting point. Adjust based on:

Higher-priced markets: 75% may be acceptable due to higher dollar profits
Risky deals: Use 65% for more cushion
Rental strategy: Different formulas (focus on cap rate, cash flow)
Market conditions: Tight inventory may require higher percentages to win deals

Common MAO Mistakes

Overestimating ARV - Use sold comps, not active listings
Underestimating repairs - Add a 10-20% buffer
Forgetting holding costs - Every month costs money
Ignoring closing costs - Both buying and selling have costs
Using 70% in expensive markets - Same % on a $500k property means bigger dollars

Frequently Asked Questions

What is MAO in real estate?

MAO stands for Maximum Allowable Offer. It's the highest price you can pay for a property while still meeting your profit goals. It's calculated using the ARV (After Repair Value) minus repair costs and desired profit margin.

What is the MAO formula?

The basic MAO formula is: MAO = (ARV × 70%) - Repair Costs. This leaves room for closing costs, holding costs, and profit. Wholesalers subtract their assignment fee from this as well.

Why use 70% for MAO?

The 70% rule leaves 30% of ARV for: profit margin (10-15%), closing costs (3-5%), holding costs (2-5%), and margin of error. Some investors use 65% for more cushion or 75% in competitive markets.

Should wholesalers and flippers use the same MAO?

No. Wholesalers need to leave room for their buyer (the flipper) to profit. A wholesaler's MAO should be lower by their assignment fee amount. If a flipper's MAO is $100,000 and you want a $10,000 fee, your MAO is $90,000. Try FlipMantis free.